alerts & publications
Container Liner Shipping Companies Committed to Change Future Price AnnouncementsFebruary 19, 2016
On 16 February 2016, fifteen container liner shipping companies offered commitments to the European Commission (the “Commission”), including changes of their price announcements, as the Commission considered that the previous practices could enable those carriers to second-guess each other’s prices and facilitate coordination among them.
Suspecting a breach of antitrust rules, Commission officials undertook unannounced inspections on 17 May 2011 at the premises of fifteen active companies in the container liner shipping in several Member States. On 21 November 2013, the Commission opened formal antitrust proceedings against those carriers in order to investigate the practice of publishing General Rate Increase (“GRI”) announcements. Since 2009, the carriers made “regular public announcements of price increase intentions through press releases on their websites and in the specialised trade press.” The announcements do not indicate the fixed final price for the service concerned, but only the amount of the increase in US Dollars, the affected trade route and the planned date of implementation. They are made several times a year and published typically three to five weeks before the announced implementation date. The Commission noted that during that time, some or all of the other carriers announced similar intended rate increases for the same or similar route and same or similar implementation date.
The Commission raised concerns that the GRI announcements “may not provide full information on new prices to customers but merely allow carriers to explore each other’s pricing intentions and coordinate their behaviour.” The Commission considered that this practice may harm competition and customers by leading to a price increase on the market for container liner shipping transport services on routes to and from Europe.
CommitmentsIn order to address the Commission’s concerns related to concerted practices and put an end to the investigation, the carriers offered the following commitments, applicable for a period of three years:
- the carriers will stop publishing and communicating GRI announcements, i.e. changes to prices expressed solely as an amount or percentage of the change;
- the price figures that the carriers announce will benefit from further transparency and include at least the five main elements of the total price (base rate, bunker charges, security charges, terminal handling charges and peak season charges if applicable);
- any such future announcements will be binding on the carriers as maximum prices for the announced period of validity (but carriers will remain free to offer prices below these ceilings);
- price announcements will not be made more than 31 days before their entry into force, which is usually when customers start booking in significant volumes; and
- the commitments proposed by the parties include two exceptions in situations that would be unlikely to give rise to competition concerns. Namely, the commitments will not apply to: (i) communications with purchasers who on that date have an existing rate agreement in force on the route to which the communication refers and (ii) communications during bilateral negotiations or communications tailored to the needs of specific identified purchasers.
These commitments are aimed to introduce greater transparency into maritime transport pricing for the first time.
The Commission has published a Notice in the EU official Journal, which details the antitrust infringements issued to the carriers and confirms that the new price announcements proposed by the carriers are acceptable to the Commission. The Notice invites interested parties, such as shippers, to provide some feedback on the commitments within one month from 16 February 2016. This is called a market test.
The Commission has been supported by the Freight Transport Association (“FTA”) and the British Shippers’ Council which disapproved the GRI announcements for more than five years. FTA Director of Global and European Policy Chris Welsh said: “We welcome the Commission bringing this important case on liner shipping prices to a satisfactory close. As one of the original complainants, FTA will respond to the market test now that the Commission has published its Notice.” He also added: “We look forward to a new clear and open approach by the shipping line operators which will remove the need for our members to resort to court proceedings for competition damages.”
If adopted by the Commission, the commitments would involve no admission by the carriers of the existence of an infringement of the competition rules.
The Commission’s case could have relatively wide-ranging implications across industries. According to the publicly available information, there was no suggestion that there had been any direct contact between the investigated parties, and it appears that the infringement was thought to consist purely of price announcements made to the market.
From the information available and the structure of the remedy, it appears that the Commission objected to these particular announcements because they were too vague to actually give customers specific information about future prices. It may be that the Commission therefore considered that the price announcements could not serve the purpose of informing customers; it only serves the purpose of “testing” the possibility of a price increase with competitors. The case leads to the counter-intuitive outcome of requiring the companies not to reduce the level of price announcements but actually increasing the accuracy and detail thereof. As a result, companies operating in industries such as the chemical industry, where price increases are often announced through trade press, will need to carefully consider if more precise announcements need to be made.
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Riccardo Celli, an O'Melveny partner licensed to practice law as an Avocat in Belgium, as an Avvocato in Italy, and as a Solicitor in the Supreme Court of England and Wales, Christian Riis-Madsen, an O'Melveny partner licensed to practice law as an Avocat in Belgium and as an Advokat in Denmark, and Charlotte Jacquot, an O'Melveny associate licensed to practice law in Paris and as an Avocat in Belgium, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
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